U.S. home prices fall to nearly decade low

February prices down 0.8% on the month

WASHINGTON (MarketWatch) — U.S. home prices dropped sharply in February to hit the worst level in nearly a decade, according to a closely followed index released Tuesday.

The S&P/Case-Shiller 20-city composite fell 0.8% compared to January levels to take the year-on-year drop to 3.5%. The index is at its lowest level since October 2002. Of the 20 cities measured, 16 had negative readings and only three showed gains.

The decline may be due to the typical pattern of diminished interest during the winter and heightened interest in housing during the spring and summer, as prices rose 0.2% on a seasonally adjusted basis, the first rise since April 2011. S&P says the unadjusted series is a more reliable indicator.

House prices have dropped by over a third from their peak as the bubble burst. High levels of distressed properties on the market have hampered the market, as has the high unemployment rate and tough credit conditions, which have offset the benefit of mortgage rates near or at record lows.

Prices in Atlanta continue to plummet, with the 12-month change collapsing 17.3%. That’s the worst annual rate of decline in the 20-year history of the index.

Home values in Atlanta, Charlotte, Chicago, Cleveland, Las Vegas, New York, Portland, Seattle and Tampa all were the worst since the housing bubble burst.

Phoenix by contrast has seen prices rise 3.3% on an annual basis, which is the second month of positive 12-month returns and the fifth straight monthly gain.

“While there might be pieces of good news in this report, such as some improvement in many annual rates of return, February 2012 data confirm that, broadly-speaking, home prices continued to decline in the early months of the year,” said David M. Blitzer, chairman of the index committee at S&P Indices.

Separately Tuesday, the Federal Housing Finance Agency said home prices in February rose 0.3% on a seasonally adjusted basis. Compared to the same period of 2011, prices are up 0.4%.

The FHFA gauge differs from the Case-Shiller in that it’s measured only from purchase prices of homes backing mortgages have been sold to or guaranteed by Fannie Mae or Freddie Mac. Another difference is the Case-Shiller index includes three months of data in their series to smooth out volatility. Read external link on how FHFA price is calculated.

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